A real business cycle is most likely to be the result of
A) a manipulation of the business cycle shortly before national elections.
B) a breakdown of the automatic stabilizers.
C) discretionary fiscal policy.
D) shocks to the supply side of the economy.
E) expansionary monetary policy.

Question

Quizplus · Accepted Answer

Real business cycles are caused by exogenous (external) shocks to the supply side of the economy, such as changes in technology, natural disasters, or changes in resource prices. These shocks affect the economy's production and output levels, leading to fluctuations in the business cycle. The other options listed do not directly cause real business cycles.

A Real Business Cycle Is Most Likely to Be the Result